PSI Life Exam Practice Test

What type of annuity allows the policyowner to choose a pre-determined number of benefit payments?

1. Fixed annuity

2. Variable annuity

3. Period Certain

4. Immediate annuity

The correct answer is: Period Certain

The type of annuity that allows the policyowner to choose a pre-determined number of benefit payments is known as a Period Certain annuity. This specific type of annuity guarantees that the policyholder will receive payments for a set number of years, regardless of whether they are alive to receive all the payments. If the policyowner passes away before completing the total number of payments, the remaining payments will go to a designated beneficiary. In contrast, a fixed annuity provides a guaranteed return and fixed payments for the lifetime of the annuitant, without specifying a pre-determined period for benefits. A variable annuity, on the other hand, ties its benefits to the performance of selected investments and does not include a guaranteed number of payments. An immediate annuity begins payments almost instantly after a lump sum is paid, typically based on life expectancy, but it does not specify a pre-determined duration of payments in the same way as a Period Certain annuity.